More than a few blog readers have emailed about the fundraising announced yesterday by Agronomics, the food tech-focused fund founded by Jim Mellon.

Over at FutureFoodFinance, we ran a quick news item, giving the details: you can read that article here:

To be clear I own a small number of shares in Agronomics, which have gone up many times in value. I have taken profits as the share price has continued pushing higher. On balance I think if you get the chance to subscribe for the say the broker shares at 22p, I’d take the opportunity. If the share price weakens to under 22p I might also top up my shareholding.

I’m completely aware that many might view this cautious optimism on my part as illogical. The fund trades at a huge premium to underlying net asset value and on any rational basis, the fund is probably overpriced. But the portfolio is impressive and many of the businesses in there are likely to move towards an IPO in the next year or so, especially Blue Nalu (a fish substitute business) as well as LiveKindly, the activist-based ‘collective’ focused on alt proteins. Overall the VC nature of the fund poses a challenge for any fundamentals-based analysis. These stakes can only be held on the balance sheet at the last ‘event’ valuation, usually via a pricing set at the most recent fundraising round.  That might not equate to the public market pricing of said business.

And here’s the key point for me. The whole alternative proteins/foodtech/AgTech spectrum is only in the very early stages of development. Most deals that I see are in the seed/Series A stage of the lifecycle of the industry. That means there’s a relative paucity of later-stage businesses that are well beyond the minimum viable product stage and are actually selling products in supermarkets. That places a premium on these assets but also creates a challenge for the likes of Agronomics. To hold its position in the later fundraising rounds before IPO, it needs to keep stumping up more money to ‘stay in the game’ – thus the fundraising. If, like me, you think we are really only in the very early stages of a profound transformation, then you’ll probably be forced to accept that there is no terribly convincing, fundamentals-driven way of valuing this portfolio – or at least not one that I would trust.

That said, I’m not completely convinced that Agronomics’ focus on cultured meat and its attendant intellectual property to the exclusion of other niches is where I would be. To repeat previous posts I think there’s a much bigger range of interesting niches out there:  I would highlight

  • AgTech (farm automation),
  • cultured fats,
  • technologies to enable farm based carbon sequestration,
  • plant biotech, and
  • last-mile technologies to deliver alternative proteins to the end consumer.
  • I also think that there’s plenty of opportunities in plant-based proteins, and more specifically in hybrid plant/cultured meat products (using fats and other ingredients).

EatBeyond Global, the listed Canadian fund is arguably playing in a broader set of niches but in truth has a less focussed portfolio of impressive businesses in my view.  Still, compared to Agronomics, its shares look cheap, relatively speaking. And yes I hold shares in EatBeyond as well.